How To Get The Best Deal On A New Car
Wow, you just got A NEW CAR!?!?
There’s a question nearly everyone loves answering in the affirmative.
However, getting there is a process hardly anyone enjoys. Fear not though, for I am about to show you how to get the best deal on a new car. What’s more, I’ll also help you make sure the car you get is a car you’ll enjoy for many years to come. Yes, there is a bit of work involved, but if you put in the time, I guarantee you’ll be pleased with the outcome, and you’ll be well educated on your new purchase.
So, what’s the first step?
Establish A Budget
As with so many things in life, getting the best deal on a new car is predicated upon your ability to pay. So, before you start lusting after any particular model, make a detailed listing of all of your current financial obligations and add them up. Subtract the total from your take-home income—remembering to include setting some coin aside for savings, entertainment, and etc. What’s left is roughly how much you can afford to spend every month toward your new ride.
But wait, you’re saying, “This doesn’t apply to me, I can pay cash.”
Just make sure you also consider operating costs.
Even if you have the $70,000 in cash it’d take to put a reasonably equipped new Boxster in your driveway, you’ll still need insurance. You’ll also pay taxes on it every year in the form of registration fees. Then, there’s fuel to consider. Happily, many new cars come with scheduled maintenance included in the price for the first three years, so you might be OK there, but if your choice doesn’t offer it, there’s another expense to book.
Bottom line (pun definitely intended), you want to make sure all associated costs can be easily absorbed by your monthly income—after your current expenses—without reducing you to sitting home every night staring at your new car as the only entertainment you can afford.
Know Your Credit Score
Even if paying cash is an option for you, it’s always a good idea to keep track of your credit score. This is even more important if you’re taking out a loan to get the car. If your credit score is low, you’ll pay more for financing, which will limit your choices.
Conversely, the higher your credit score, the better financing deals you can leverage, and the broader your range of choices. This is a huge part of how to get the best deal on a new car. It's also why I’m advising you to get your credit score before you start looking at cars.
And, make sure you do it yourself.
Most banks allow you to check your credit score for free if you’re using their online services.
Yes, car dealers also do it as part of the car-buying process, but it’s better for you if you know how you rank up front. People make mistakes, and if their mistake consists of quoting you a lower score than you have earned, it will cost you money.
Get Yourself Pre-Qualified
If you'll need financing, once you’ve figured out how much you can afford to spend, get pre-qualified for a corresponding loan amount—and take note of the interest rate. If you already have a relationship with a bank or a credit union, you’re likely ahead of the game in terms of saving money on financing. Yes, a dealer can help you get hooked up with a loan, but you’ll probably pay more for the convenience in the form of a higher interest rate.
After all, the dealership's going to cut itself a slice in return for providing the service.
When you’re pre-qualified, and you know the rate, you can sometimes use this information to negotiate a lower rate from the dealer. Even if you can’t though, you’ll usually be doing better than the dealer’s offering by securing your own financing.
BTW, if you find yourself having to go for a term longer than 48 months to make the loan payment fit into your budget, you need to be looking at something less expensive. Stretching a loan out over five, six, and especially seven(!) years to get into a car is a bad move.
You will wind up owing more than the car is worth. Further, it’s always a good idea to make sure the car stays under warranty for the duration of the loan. That way, if a catastrophic malfunction happens, it’s covered without you going into your pocket for repair costs—in addition to the monthly note.
You know, the monthly note you stretched to afford in the first place?
But enough of that, let's get to the fun part!
Let's Look At Some Cars
We all have needs and we all have desires; problem is needs and desires have a tendency to parallel rather than intersect.
If you love to drive, you’ll want something responsive, but if you have a family and this will be your only car, you’ll need something practical. A two-seater or even a two-door coupe is out of the question.
Buying what you want, only to discover it isn’t what you need, will ultimately force you to spend more money. Why? Because getting rid of the “want” to get the “need” will cost you more than simply getting the “need” right off the top.
Once you know how much you can comfortably spend, and you have a solid idea of the attributes you’ll require; it’s time to see what models fall into your affordability range. A number of sites feature tools capable of suggesting models once you indicate what type of car you’re after, desired features, and price range. One of the best is Edmunds.com.
Once you find your list, take your time, look at the suggested models, read reviews, and narrow your selection down to a list of up to five cars.
The Fun Part — Test Drives
With your list established, if your area is large enough to support one, try to find an auto mall close to where you live carrying as many of the models on your list as possible. This will permit you to drive them all back to back. If you can’t find a mall, that’s OK, visit individual dealerships. But either way, plan to spend an entire day test driving cars, and try to drive them all in the same day, so your impressions remain fresh as you go from car to car.
Do everything possible to make this happen on a weekday—ideally Tuesday through Thursday. These are the days auto dealerships are slowest. Most people come into showrooms on the weekend, so salespeople can be too busy to accommodate extended test drives. Plus, since you’re not buying at this point, you don’t want to take a salesperson away from someone who might be about to buy a car that day.
Keep in mind, the car you choose will be a huge part of your life for the next three to four years. Take your time and make your observations. Look in the trunk to see how it’s configured. Yes, an article says it has 16 cubic feet of trunk space, but how is it shaped? Can you realistically get it to haul all the stuff you need to haul? If you’re buying a family car, what’s the legroom like in the back seat? Will your family be comfortable?
Seated behind the wheel, can you see out OK? Do you have to crane your neck to look down the road, or to see out to make turns? Are there blind spots? How comfortably do you fit? When the seat is adjusted so you can reach the pedals, is the steering wheel too close or too far away? Can you reach all of the controls you need to reach to operate the car safely? Is it quiet enough? Is there anything at all about the car that bugs you? If it bugs you even mildly on the test drive, you’ll absolutely hate it two years later when you’re making payments on the car.
For the sake of brevity, this is an abbreviated list; for more details read how to test drive a car.
When you’re done with your test drives, there will be two or three standouts with which to move on to the next phase of the process.
How To Work With Salespeople
Before we get there though, here are a few words about working with salepeople.
Selling cars is an honorable profession; sadly though, there are people out there who have sullied its good name. We know this and salespeople know this. Why make a big deal out of it?
Upon your visit to a dealership, you’ll be greeted by a salesperson. Be cordial, and tell them right up front exactly what you’re doing, where you are in your process, and why you’re there. Let them know you’re working your way through your list of potential models, and you won’t be making a purchase decision during this visit.
Then, go with them to test drive the car you came to see and make your evaluations.
At some point, every good salesperson will ask what they can do to help you buy the car today. Regardless of what you've told them, they’re supposed to do this—it’s part of their job. Just remind them you still have a number of factors to consider before you start talking deals. Take their card and assure them you’ll give them a fair opportunity to win your business if their car makes your final cut.
Sometimes, they’ll try to get you to wait to talk to another “more senior” salesperson. Politely refuse the offer and remind them you still have other cars to drive before you decide. If they get irritating about it, leave their card on their desk and walk. Plenty of dealerships will afford your words the respect they deserve.
While we're on the subject of respect, some people tend to behave condescendingly to women when it comes to things automotive. If you ever feel you're being disrespected at any juncture during your interactions with a salesperson, you owe it to them to walk. Tolerating such behavior only teaches them it's OK, and you can bet they'll do it to the next person.
Rather than trying to correct them, save yourself the irritation—just leave the dealership.
Eventually, their lack of sales will get them what they've earned.
Narrowing Down The Field
After you’ve driven the five top models on your list, one or two will stand out above all the rest. Those are your finalists. Spend some more time online researching them. Use our list of finance and lease deals to see what specials their builders are offering. While you’re on the manufacturer’s sites, configure your finalists the way you’d like them equipped so you can get a solid idea of what you’re looking at in terms of costs.
Playing with the configurations, you’ll be tempted to go off. It’s OK to do it for fun, but when it comes down to it, keep in mind every box you click is another set of dollars out of your monthly budget. So ultimately, you have to be practical.
If seat heaters are offered, do you live somewhere they’d be needed? Do you need satellite radio? Can you live with the stock wheels, or do you have to have the larger-diameter optional alloys? Is all-wheel drive a necessity? Above all, consider what those choices will do to the overall price versus the benefit you'll derive, and stay within your budget.
Once you have the finalists configured at the price you can afford, print them out as configured and save them—you’ll need the build sheets when you go back to the dealership to select your car.
Check The Insurance Rates
Yeah, I’m still singing the practicality song.
Once you get your models narrowed down, go online, or get with your insurance agent if you already have one, and ask for quotes. You’ll find more about how insurance coverage works here on the Automobiles Illustrated site under “How To Buy Car Insurance”.
In all likelihood, given your narrow focus, the quotes you get will all be pretty close to one another, Still, it’s useful information to have as part of the decision-making process.
Figuring Out How Much To Pay
Once you’ve got your cars built, nailed down, and you have MSRPs in hand, you’re ready to dig around to see what others have paid for similar cars in your area. After all, the best way to comfortably buy a new car is to know what they’re going for—right?
While a number of sites around the web offer it, the best tool we’ve seen for determining this is at Kelley Blue Book.com. The site’s Fair Purchase Price calculator is an excellent way to learn the average going price for a particular model where you live.
Just make sure you configure the cars in your query exactly the way you want them, so you’re always comparing peaches to peaches.
Time To Go Get Your Car
Once you have all of the preceding information in hand, one car should be standing out above the others. If there's still more than one, drive those again, repeating the test drive process outlined above. This last drive should seal the deal, and you’ll be ready to negotiate the price of your new car. You want to do this in the middle of the day, in the middle of the week, and at the end of the month when the dealership needs to make its monthly quotas.
With your fair purchase price information in hand, this part of the process is considerably less nerve wracking. After all, you now have a solid target you’re trying to hit, as opposed to just pulling numbers out of the air and hoping the dealership will go for it. Plus, you know how much is too much, so you can avoid overpaying.
In some cases, the exact car you want may not be at the dealership, so you'll have to order it, or maybe they can do a trade with another dealer to get it for you. If you have the time to wait, this is OK. However, you can also use this as a bargaining chip. If they have a similar car with more equipment on it than you want, ask if you can have it at the price you intend to pay for the car you actually want to help them move it off their lot—and save them the trouble of special ordering a car for you.
Since you’ve already done your homework on financing, you can avoid getting caught up negotiating payment as opposed to the price. Still, it should be said, always negotiate based upon price. After all, it’s easy to make any payment work by stretching out the loan term. Because you're pre-qualified, you already know what your monthly payment is going to be based on the price you want, the length of the loan, and the interest rate for which you qualify. All you have to do is hold firm until the dealership agrees.
Generally speaking, you want to try to land in the middle of the fair market range for the car. To get there, it never hurts to start below the low end—you never know, they just might go for it. In all likelihood though, you’ll land somewhere in the middle.
Expect to have to do some back and forth. Yes, they'll already know it's a fair offer, but they have to try to maximize their profit, so you may have to go at it a bit. Stand pat, you’ll get your car at a fair price. If they're being obstinate, go find another dealer. If your offer is reasonable—which it will be if you've followed these instructions—you'll find somebody willing to accept it.
What If You Have A Trade-in?
In almost every case, selling your old car yourself will result in a more profitable transaction for you. Dealers have to resell any car they buy, so at best you can only expect them to offer you a "wholesale" price for it.
If the prospect of selling a car yourself intimidates you; or if you need to just get rid of your old car quickly, the convenience might outweigh the cash. That's a decision only you can make.
Either way, you need to get a good idea of what the car is worth. KelleyBlueBook.com is an excellent resource for this. There, you'll find a tool, which will walk you step by step through the process of determining your car's value. Once you see what it's worth, you might actually decide selling on your own makes sense.
If you decide to go the trade-in route, leave your current car out of the transaction until you've reached an agreement on the price of the new car. At the beginning of the deal, you'll be asked if you plan to sell your car or trade it. Tell them you'd like to see what kind of deal you can work out on the new car first, then you'll decide what to do. Keeping the tranactions separate allows you to maximize the amount you can get for your car, while minimizing the amount you pay for the new one.